Free College Education Will Worsen the Already Extreme Labor Shortage

October 15, 2021

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46 comments

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Economics

Population Change in Last 5, 10, 15 Years

Population Change Details

In the last 5 years, the total noninstitutional population age 16 and over rose by 7.68 million.
The population change of those aged 65 and older rose by 8.24 million, over 100% of the total increase.
The population change of those aged 60-64 rose by 1.39 million
The 60+ total is 9.63 million.
The population of the prime-age workers, those aged 25-54 rose by a mere 219,000.

Civilian Noninstitutional Population by Age

The above chart highlights the trend. All of the population growth and then some has been in those age 65 and older.

A look at labor force participation rates, shows why this is a serious problem.

The labor force participation rate is the percentage of the working-age population, age 16 or older, in the labor force.

The labor force is the number of people working or actively seeking work.

Labor Force Participation Rates

Current Participation Rates by Age Group

Total 16+ SA: 61.6%
16-19 SA: 36.3%
20-24 SA: 70.6%
25-54 SA: 81.6%
55-59 NSA: 73.2%
60-64 NSA: 57.0%
65+ NSA: 19.2%

I used seasonally-adjusted numbers when available. The BLS does not have seasonally-adjusted data for all age groups. Seasonal adjustments matter most for those in school.

Key Details

Retirement Age: There is a rapid decline in the participation rate at age 60 from 73.2% to 57.0%, then an even steeper decline from 57.0% to 19.2% at age 65 when most people retire.
High School Age: The participation rate of those aged 16-19, largely those in high school, was on a steady decline from 51.6% in 2000 to the 34.1% bottom in 2010. Since then,the participation rate has risen to 36.3%. That beats the February 2020 pre-pandemic rate of 36.2%.
College Age: The participation rate of those aged 20-24, largely those in college, had a pre-pandemic bottom at 69.7% in January of 2016. In February of 2020 the participation rate rose to 72.8%. It’s now at 70.6%, down 1.9 percentage points.
Overall: There has been a steady decline in the overall participation rate from 66.9% in September of 2000 to 61.6% in September of 2021.

Unlike the High School participation rate, the College-Age rate never recovered.

Why?

This age group easily made more in unemployment benefits than they made working.
Many saved that money and feel no strong pressure to work even as benefits expired.
Others moved back home and feel little pressure to work.

Age 20-24 is a largely unskilled age group. They did not lose jobs due to lack of skills.

The unmistakable conclusion is that the participation rate decline in this age group is voluntary. Moreover, voluntary unemployment does not stop with those aged 20-24.

Unemployment Levels in Thousands

Leisure and Hospitality and retail trade are primarily unskilled jobs. Self-employed individuals may or may not have a skill, but the unemployed in this group are not highly skilled on average.

Yet, millions of jobs are available and go unfilled.

This is largely voluntary.Those who saved their pandemic benefits just might take a lot longer to look for a job.

That’s the huge flaw in analysis that supposedly shows little improvement between states ending benefits early and those who didn’t. It will take time to sort this out.

What About Free College?

The Wall Street Journal notes nearly six million students, about 1 in 4 in higher education, attend public two-year colleges.

Also, forty-seven percent of Americans between the ages of 25 and 64 have an associate degree or higher, according to the Organization for Economic Cooperation and Development.

That’s a big pool eligible people who may go back to college.

The alleged cost of the program is only $256 billion. Please! It will never stop there.

And what about the increased propensity of those getting free tuition to stop looking for work?

Millions of Unfilled Jobs

There are millions of leisure and hospitality jobs available and millions more retail jobs available perfectly suited for those in college.

But college-age kids and other unskilled labor did not return to work because they made more being unemployed.

The Biden administration now wants yet another free money proposal that provides a huge incentive to not work.

Free College Isn’t Free

Add it all up and free college is hugely inflationary.

The problems go well beyond the stated costs into a severe exacerbation of a labor shortage already compounded by other free money handouts and boomers retiring en masse.

Mish

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KidHorn

4 years ago

Has anyone considered whether universities can handle free tuition? They’ll be inundated with applications. Students will attend and then drop out after a few weeks because they’ll have nothing to lose. Classes will be half empty at the end of each semester. Do the colleges get paid full tuition for students who drop out? If not, the colleges will make it impossible to fail out. Students will figure it out and make no effort, knowing they’ll get credit for the class no matter what.

JeffD

4 years ago

The NASDAQ has increased 10x in a little over ten years. Why work when the Fed is handing out free money to stock holders?

oee

4 years ago

Mish, you have claimed that Robots were going to replace us all. You want to bring back slavery by your comments. People need education to improve skills so they can have marketable skills. Education has a 8 % return.

Please let me know when will the robots take over our jobs?

tomatohead

4 years ago

Reply to oee

Robots replace jobs and people fill new ones. Cat’s Cradle is a good story, and metaphorically correct in some ways and logically correct in some ways, but the future of humanity will suffer far more from “(un)free education”.

tomatohead

4 years ago

Reply to oee

How about free apprenticeships instead of unfree college? That will create people who can create robots.

Webej

4 years ago

If there’s on thing the last 50 years of increasing proportions of people going to college teaches us, is that you do not get better quality people just by adding some tuition to them. Educational credentials is itself one of the things with an extraordinary inflation rate.

Mr. Purple

4 years ago

In the old days, underemployment was mitigated by indentured servitude, expulsion and war. We’ve come a long way baby.

Northeaster

4 years ago

College degrees are not what they used to be, so many useless degrees in an era where skills are needed. That’s after a bigger and underlying problem decades in the making:

https://fred.stlouisfed.org/graph/?g=HPyn

Pontius

4 years ago

You and Karl Denninger are the only two investment cassandras highlighting this statistic. Huge implications for the economy going forward. Pandemic just accelerated existing trend.

The Mice & Men narative of our times.

Asset price increases fueled by Fed policy lead to great exodus from workforce of 60+ to tax haven states. Youth disinclined, by parent coddling, to enter workforce; or enticed by income/lifestyle to be foot soldiers in the drug industry. Problem in early innings. Inflation, scarcity just beginning.

From an investing view, run, do not walk, away from businesses requiring labor as a large component of operations. Some business groups, despite best efforts of management, will be unprofitable now and into the future.

tomatohead

4 years ago

Reply to Pontius

Check out Chris Hamilton Economica blog. Pure focus on demographics dating back a decade. And he’s far from being an economist.

Doug78

4 years ago

Is a university education worth the cost?

https://www.smbc-comics.com/comic/college-level-mathematics

whirlaway

4 years ago

“Those who saved their pandemic benefits just might take a lot longer to look for a job.

That’s the huge flaw in analysis that supposedly shows little improvement between states ending benefits early and those who didn’t. It will take time to sort this out.”

And all that extra time can be used to invent some new excuses! LOL.

The reality is that if wages < total costs incurred in earning those wages, such jobs will go unfilled.

RonJ

4 years ago

Reply to whirlaway

“The reality is that if wages < total costs incurred in earning those wages, such jobs will go unfilled.”

The reality is that adult children live with their parents, or share an apartment with other people while working jobs you think will go unfilled.

KidHorn

4 years ago

Reply to whirlaway

So, you’re saying jobs are going unfilled because in aggregate people are losing money for working? Any evidence to back up this absurd claim?

Since2008

4 years ago

In Indiana community college associates degrees are already tuition free for people who do not have a bachelors degree and are willing to study something like nursing which leads to a registered nursing (RN) license or Robotics operations for manufacturing and several other majors.

It is called the NextLevel Jobs program. You can Google it and see for yourself. I actually went to community college after getting a bachelors, degree many years ago. So I did not qualify.

So when you hear proposals about making community college free – those are behind the times as far as Indiana goes.

ColoradoAccountant

4 years ago

And yes, education is a local issue. The Feds created the Dept. of Education recently. We survived 200 years without it. We won’t last very much longer with it.

Since2008

4 years ago

Reply to ColoradoAccountant

They created it during the Carter administration. We put a man on the moon before it was created.

whirlaway

4 years ago

Reply to Since2008

Well, the GI Bill of 1944 was national. It was decades before the USDOE was created. AND it was a huge success “propelling Americans to new heights of education and helping to fuel the economic prosperity that characterized the postwar era.”

KidHorn

4 years ago

Reply to whirlaway

It’s not the same as free tuition. They were granted a fixed amount of money to pay for college.

Corvinus

4 years ago

Reply to Since2008

Considering that test scores, and the general quality of the student body has gone into the toilet – you have to wonder if “Department of Education” is an Orwellian term ala “Ministry of Truth”

I came across an article the other day that discussed a situation where engineering freshmen were having trouble in a particular class and it boiled down to they had no conception of where their files were stored on a laptop. I’ve heard for years about engineering professors decry the lack of common sense in engineering freshmen who have never even so much as fixed a bicycle yet intend to design complex machines.

ColoradoAccountant

4 years ago

Sometimes Community Colleges just teach the courses the student should have got in high school. In Colorado these remedial courses are billed to the student, no state support. Then they can decide to apply to a 4 year school or look for a trade. Their remedial classes will not count as credit toward the four year degree.

paperboy

4 years ago

you can either control demand by quantity or price

years ago the cal state system was free to instate hs students. Plenty of demand, but little supply of state financial support. So you had the absurd situation of a student being there 5 years and still not able to get into a required freshman English class to graduate

Rbm

4 years ago

I keep hearing about employers who cant find employees with the skill set for said jobs. But know one wants programs that address the issues. Now i dont think everyone should go to college but haw about some help at tech schools.

Six000mileyear

4 years ago

Defaults on mortgages and credit cards are around 2-3%. The existing college loan default rate (10 to 12 %) indicates 8 to 10% of the students should not have gone to college in the first place. “Free” college would waste even more money and perpetuate an entitlement attitude.

Eddie_T

4 years ago

Reply to Six000mileyear

As I have written many times both here and elsewhere, the student loan default rate is quite low among graduates of our flagship state universities. The typical defaulter is more likely to be a person of color, poor, and to have wasted his/her money on a scam private trade school with a known default problem….many of those also owned by persons of color, btw. I could give you a list.. Congress knows, but it isn’t politically expedient to weed the problem out. It’s contrary to the narrative.

And most of the defaulters owe $10K or less.

The popular press likes to point out the outliers, like the orthodontist in Lehi, UT who owes a million bucks. It makes for a more outrageous story. But the truth is quite different than most of the stories you read.

Eddie_T

4 years ago

Sir David Ames, Conservative MP, was stabbed to death earlier today in a church. The assailant was arrested, but no information whatsoever is being released about him other than his age (25).

I’m just guessing here , but I bet the knife-wielding killer was not just a frustrated Labor supporter mad about Brexit.

I’m also guessing he will be in due course determined to be an immigrant or the child of immigrants, probably a Muslim, and most likely a jihadist…….but the British press is no longer able to report such things, apparently. Too Woke.

If I’m wrong I’ll apologize…..but this is the sort of information that just seems to always be withheld these days. It’s no wonder to me that this kind of omission angers a lot of common people.

Maximus_Minimus

4 years ago

Reply to Eddie_T

Some time ago, a story broke about teenage girls being raped in a heavily immigrant UK town, and local (possibly ethnic) authorities ignoring it. The British press referred to the perpetrators as Asians. This apparently was too much for some Asians, and it was revealed by Hong Kong based South China Morning Post that they were Pakistani.

There was hope for MSM like the BBC or Guardian to maintain some trust when they still allowed a comment section, but this was too

much counter to the official story that they eventually shut it down.

Doug78

4 years ago

Reply to Eddie_T

It used to be that way when “incidents” were rare but now they are much more common and the identity of the attackers come out quickly.

Zardoz

4 years ago

“The world needs ditch diggers too”

Jojo

4 years ago

Reply to Zardoz

What do we need empty holes for?

Doug78

4 years ago

Reply to Jojo

That’s where we put dead people.

Mr. Purple

4 years ago

Reply to Zardoz

“I’ve always wanted to be a priest.”

Eddie_T

4 years ago

OT….Secretary of Transportation Bootyjudge on extended paternity leave. Must be nice. Good thing we have no transportation problems in this country.

https://assets.zerohedge.com/s3fs-public/styles/inline_image_mobile/public/inline-images/butti1_0.jpg?itok=TKULeQqw

Doug78

4 years ago

There is not unfortunately a breakdown by state. Three things. If vaccination is a condition of employment then the younger ones in the service sector would quit. Second of all there could be an underground economy that has built up paying workers cash for work and not reporting. If enough people were doing it then it would show up. Perhaps many people have discovered the benifits of one working and the other taking care of the kids. There are cost savings that come with it now.

Eddie_T

4 years ago

I support government subsidized college and trade schools…..just not the way it’s being envisioned, which is a sop to the least talented and least motivated.

Community college for free doesn’t give enough bang for the buck. It’s a vote-getter, not a job getter, or a job filler.

One significant reason college costs so much is because there is a new layer of management in the university game, all high-paid, high benefit jobs that used to not even exist, but now suck up a hell of a lot of money. Teaching college is now largely given over to foreign grad students who get paid peanuts…..although the U’s manage to pay huge money to a few Nobel winners who are rainmakers for the grant system that builds the campus buildings and makes the whole scam productive…..for everybody but the students, that is.

College has been hollowed out like every other institution you can think of, just about.

But smart people who can cut the mustard in fields that matter……especially our US born kids….should get a hand up. But we don’t reward merit anymore. We want to pretend that we can just raise up the children of those who have suffered discrimination by paying their way, regardless of merit, and expect it to all work out fine. It’s a false narrative that just appeals to the Democrat’s identity politics.

Zardoz

4 years ago

Reply to Eddie_T

Making it on merit makes you a member of the hated elite.

njbr

4 years ago

Parents now generally have no expectation that their kids under the age of 30 (or a least within 5 years of college graduation) should be working. The low rate of participation below that age is the result.

Pushing the baby bird out of the nest can be deferred until the parents fly away to retirement.

PreCambrian

4 years ago

I don’t quite buy your analysis. If the 20-24 age group isn’t participating in work then I don’t see how going to college will worsen the numbers. My big complaint about “free” college is that not everyone should go to college. Some should go to trade schools, some should have other types of training. And when it is “free” people often don’t make considered decisions. So I am for free merit based scholarships with perhaps some incentives to study in areas of particular need to the nation. But it is a mistake to push everyone towards college.

davebarnes2

4 years ago

So, Mitch, as a libertarian, you would eliminate free high school education?

And, bring back coal mining jobs for 8 year olds?

TexasTim65

4 years ago

Reply to davebarnes2

See my response above.

Education is a state level issue, not a federal one. Lets states decide whether or not they want to provide free education (they already subsidize state universities).

whirlaway

4 years ago

Reply to davebarnes2

Everything has to be rolled back to the Robber Baron Gilded Age period. That is “progress”, in the eyes of some.

TexasTim65

4 years ago

Reply to whirlaway

To others, “progress” is becoming China and the Soviet Union where the government runs and owns everything and makes every decision on how things are allocated.

When do you think people should actually take responsibility for themselves (ie paying their own way)? They used to do that in this country not so long ago.

anoop

4 years ago

students still need to pay for living expenses. and this is a much better option than people taking loans and carrying debt all their lives.

Tony Bennett

4 years ago

Reply to anoop

wsj:

President Biden’s plan to offer Americans the opportunity to attend community college for free is running up against political obstacles over who should pay for it and skepticism on whether it would broaden access to higher education.

His proposal—unveiled in April as part of his https://www.wsj.com/articles/biden-to-propose-1-8-trillion-plan-aimed-at-families-tax-hikes-for-wealthiest-americans-11619600400?mod=article_inline—would waive tuition for two years of public community college. It would also provide many students more cash to cover living expenses that often deter students from lower-income families from attending.

Since2008

4 years ago

Reply to Tony Bennett

Community college for RN licenses, robotics, etc, is already100% tuition free o indiana. It’s called NextLevel. Google it.

Since2008

4 years ago

Reply to anoop

Students DO NOT need to pay living expenses. Student borrow for those also.

Free College Education Will Worsen the Already Extreme Labor Shortage

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